Posts filed under “Regulation”

I have repeatedly mentioned Too Big To Succeed as a cause of the most recent crisis, but have you ever wondered HOW we got that way?

One obvious suspect has been the easy M&A environment of the past 20 years. Instead of a very competitive market where mergers for sheer size sake is discouraged, the opposite occurred. The number of bank acquisitions skyrocketed, and the number actual banks got slashed. Where there were once over 18,000 banks in early 1980s, today, the number is less than half, to under 8,500.

Recall that the big acquisitions and mergers in the 1980s were so banks could be competitive with Sumitomo and Mitsubishi and other big Japanese banks. (Why was that again?)

Hence, we end up with a few Superbanks. Ask yourself why Citibank (C), Bank of America (BAC), Washington Mutual (JPM), and Wachovia (WFC) got to be too large to manage. And once again, I am compelled to ask why it is in the country’s interest that 65% of the depository assets are held by only a handful of banks.

To put this into context, consider the chart below, courtesy of banking analyst Dick Bove:

Yesterday, I lamented that “So far, the Obama administration approach to bailouts has been to keep running Bush Economic Term III.” The reference was to the continuation of the Bush policies, by many of the same people involved in that prior, ruinous bailout approach. Soon, we shall find out if Team Obama’s “Change we can…Read More

Front page of the NY Times goes over the shameful behavior of banks — one of the primary causes of the entire crisis — using bailout money to pay lobbyists to maintain the regulatory status quo. Its yet another reason for why they should have been put into bankruptcy once they became insolvent. So far,…Read More

Interesting Sunday Times Magazine article on Bill Clinton. The part I found most intriguing was about the regulatory acts that the Clinton administration was responsible for: “One thing that thrived during Clinton’s presidency, the economy, has wilted of late. The economic boom of the 1990s created nearly 23 million new jobs during his eight years,…Read More

Just as the Great Depression led to the creation of new institutions and financial practices, the Obama administration is on track to impact financial regulations. One of the new concepts involves a financial stability regulator, David Wessel explains.

Hey, put a BandAid on that, or it might get infected! > The Committee on Capital Markets Regulation has a proposal to fix the financial. I only gave it a quick look through, but what I saw was pretty milquetoast: Here’s the highlights — a list of obvious fixes — via Real Time Economics: -Keep…Read More

In light of Friday’s BankUnited Failure, and our earlier post on rising foreclosures, here is an updated version of a chart I ran previously from Ron Griess of The Chart Store, showing bank failures: > Bank Failures reported by FDIC

Astonishing: “Brooksley Born, the former U.S. commodities regulator who lost the fight to police over-the- counter derivatives a decade ago, said the banks that caused the financial crisis are trying to stop the overhaul of the market. “Special interests in the financial-services industry are beginning to advocate a return to business as usual and to…Read More

A lack of transparency and overall credibility in so-called league tables for investment banks mean it’s time for reform and standardization of the ranking system, DJ Newswires columnists Rob Armstrong and Alessandro Pasetti say.

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About Barry Ritholtz

Ritholtz has been observing capital markets with a critical eye for 20 years. With a background in math & sciences and a law school degree, he is not your typical Wall St. persona. He left Law for Finance, working as a trader, researcher and strategist before graduating to asset managementRead More...

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